Richards v Macquarie Bank Ltd (No 2)

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FEDERAL COURT OF AUSTRALIA

Richards v Macquarie Bank Limited (No 2) [2012] FCA 1403

Citation: Richards v Macquarie Bank Limited (No 2) [2012] FCA 1403
Parties: TRACEY RICHARDS v MACQUARIE BANK LIMITED
File number: QUD 590 of 2010
Judge: REEVES J
Date of ruling: 12 December 2012
Catchwords: PRACTICE AND PROCEDURE – admissibility of evidence – tendency evidence s 97 Evidence Act 1995 (Cth) – where tendency evidence constituted representations made by various financial advisers employed by the same corporation to 12 other customers –where relevant fact in issue was whether representations were made to the applicant by two financial advisers of the corporation on two separate occasions – whether the tendency evidence had “significant probative value” to a tendency of the corporation’s financial advisers to make the alleged representations to the applicant – where the representations allegedly made to the applicant were of an unusual nature – where only one of the tendency evidence representations was “strikingly similar” in nature to the alleged representations – where that representation was made some time before the alleged representations – where that representation was made by different financial advisers at different locations from the alleged representations – whether striking similarity in the nature of that representation and the alleged representations outweighed by stark differences in timing and circumstances – whether conduct of individual financial advisers could be viewed as conduct of the corporation – where the number of incidents in which the tendency evidence representations were made represented only a small fraction of the corporation’s operations in that period
Legislation: Evidence Act 1995 (Cth)
Evidence Amendment Act 2008 (Cth)
Trade Practices Act 1974 (Cth)
Cases cited:

Astram Financial Services Pty Ltd v Bank of Queensland Ltd [2010] FCA 1010
Australian Competition and Consumer Commission v CC (NSW) Pty Ltd (1999) 92 FCR 375; [1999] FCA 954
Combined Insurance Company of America v Trifunovski [2011] FCA 271
DF Lyons Pty Ltd v Commonwealth Bank of Australia (1991) 28 FCR 597
Hoch v The Queen (1988) 165 CLR 292
Jacara v Perpetual Trustees WA Ltd (2000) 106 FCR 51; [2000] FCA 1886
Sheldon v Sun Alliance Australia Ltd (1989) 53 SASR 97
Twynam Pastoral Co Pty Ltd v AWB (Australia) Limited [2008] FCA 1922
Zaknic Pty Ltd v Svelt Corporation Pty Ltd (1995) 61 FCR 171

Odgers S, Uniform Evidence at Law (10th ed, Thomson Reuters)
Date of last submissions: 7 November 2012
Place: Brisbane
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 65
Counsel for the Applicant: Mr Campbell SC, Mr Donnellan, Mr Andreatidis, Mr Jones
Solicitor for the Applicant: Levitt Robinson
Counsel for the Respondent: Mr Sheahan SC, Mr Pomerenke, Mr Fitzpatrick
Solicitor for the Respondent: Allens

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY

GENERAL DIVISION

QUD 590 of 2010
BETWEEN:

TRACEY RICHARDS
Applicant
AND:

MACQUARIE BANK LIMITED
Respondent

JUDGE:

REEVES J

DATE:

12 DECEMBER 2012

PLACE:

BRISBANE

REASONS FOR RULING

INTRODUCTION

  1. Mrs Richards, the applicant, has sought to tender certain evidence in this trial as tendency…

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Details
Case
[2012] FCA 1403
Decision Date

CaseChat Overview and Summary

The case of Richards v Macquarie Bank Ltd (No 2) involved the admissibility of tendency evidence in relation to representations made by financial advisers of Storm Financial Services to multiple customers. The primary legal issue was whether the tendency evidence met the "significant probative value" condition as set out in section 97 of the Evidence Act 1995 (Cth). This evidence was sought to be introduced to establish a pattern of misleading or deceptive conduct by Storm in its dealings with the applicant, Mrs Richards. The court had to weigh the probative value of the evidence against the potential for prejudice, confusion, or undue waste of time.

The Federal Court considered whether the tendency evidence, which included representations made to 12 other customers by different financial advisers, had significant probative value in proving the alleged representations made to Mrs Richards. The court examined the similarity in nature of the representations, the timing and circumstances of the events, and the overall significance of these incidents within Storm's operations. The court concluded that the tendency evidence did not have significant probative value due to the stark differences in timing, circumstances, and the relatively minor fraction of Storm's operations these incidents represented. Consequently, the tendency evidence was deemed inadmissible under section 97 of the Evidence Act.

The court found that the tendency evidence did not meet the "significant probative value" requirement and, therefore, could not be admitted. This decision was based on the lack of striking similarities between the representations made to Mrs Richards and those made to other customers, coupled with the minor impact of these incidents on Storm's overall operations. The court's reasoning was grounded in the statutory language of the Evidence Act and the need to balance the probative value of the evidence against the risk of undue prejudice or confusion. The court's conclusion effectively precluded the introduction of the tendency evidence in the trial.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

In their dealings with its customers, Storm required its financial advisers to follow a particular process. During the initial stages of their dealings, that process included completing a detailed document entitled “Confidential Financial Profile” for each customer and, based on that, providing them with a lengthy written statement of advice.MRS RICHARDS’ EVIDENCE This tendency issue was argued on the basis that Mrs Richards would give evidence that, during her initial dealings with Storm, Ms Seymour took her through her Confidential Financial Profile document and discussed its contents with her. Relative to the risk of her following the Storm investment strategy, Mrs Richards is to give evidence as follows:I recall reading the sections under the heading “risk/volatility statement” and under the heading “Personal Profile”. Having re-read that section of the document I recall Nancy [Seymour] explaining the difference between “real risk” and “manageable risk”. She told me that ‘manageable risk’ was concerned with volatility in the share market but did not involve any risk to capital over the long term and that “real” risk meant that I could lose some or all of my capital. She told me that provided I had an investment time frame of 5-7 years there was no “real risk” involved in investing in shares, because the share market always goes up over that period. And further:Don’t worry there really is no risk. If anything goes wrong, it is covered by insurance. In relation to her first meeting with Mr Drummond (after he became her financial adviser), Mrs Richards is to give evidence that she discussed the question of risk with him in the following terms:I had a number of discussions with Stuart [Drummond] about risk during this meeting. By this time I had misgivings about the quality of Nancy [Seymour]’s advice and I wanted reassurance. I recall at one point asking Stuart whether it was “risky to put all my eggs in one basket” (referring to the share market). I recall Stuart responding in words to the following effect: “Not at all. We invest across the All Ordinaries index so that your investments are diversified across many industries. Over time the index always makes money. When events adversely affect particular industries others will benefit. Diversification is the key. There is no risk.”THE ISSUES OF FACT AS PLEADED These statements were taken up in Mrs Richards’ further amended statement of claim where she claimed, among other things, that Storm had made certain representations to her that were misleading or deceptive in contravention of s 52 of the Trade Practices Act 1974 (Cth). The allegations in relation to Ms Seymour were contained in para 72 of that document as follows:In or about June or July 2001 Storm made the following representations to the Applicant:(a)Storm would devise an investment strategy for the Applicant which involved no risk of the Applicant losing her Equity Contribution (“First Risk Representation”);(b)if the investment strategy devised by Storm for the Applicant did involve any risk of capital loss, such losses would be covered by insurance (‘Second Risk Representation”).ParticularsThe representations were made expressly by Nancy Seymour (Storm) during meetings with the Applicant in or around June or July 2001.(c)Storm would prepare an investment plan for the Applicant which, over the medium to long term, would involve minimal or no risk of capital loss (“Third Risk Representation”).Particulars(i) The representation is partly express and partly implied.(ii)In so far as it was express, it was set out on page 8 of the Confidential Financial Profile completed by Ms Seymour on behalf of the Applicant on 19 June 2001 and signed by the Applicant on that date.(iii)In so far as it was implied, the representation arises from the text on page 8 of the Confidential Financial Profile and in circumstances in which the Applicant selected the pro forma “Personal Profile’ statement on the that document which provided that she was prepared to ‘accept volatility over the medium to long term if the investment growth is higher and the risks over that term are minimal or eliminated” and Ms Seymour signed and accepted that Confidential Financial Profile.

Decision

Reasons for decision

Finally, even if the evidence in relation to the five separate insurance representations, or the three separate margin call representations, were to be taken together as the corporate conduct of Storm, when one considers the unexceptional nature of the subject matters involved (see at [61] above) in the context of Storm’s overall corporate operations in the period concerned (see at [59] above), I do not consider this evidence is of any significance in establishing any underlying unity, system or pattern going to the existence of a “company line” or “culture” in Storm as a corporate entity such that it may have had a tendency to make representations of either kind.CONCLUSION For these reasons, I do not think that the tendency evidence contained in the statements of the 12 Storm investors is such that it meets the “significant probative value” condition set out in s 97(1)(b) of the Evidence Act. It necessarily follows that this tendency evidence may not be admitted as evidence in this trial. Because of this conclusion, it is unnecessary to consider whether this tendency evidence should be excluded under s 135 of the Evidence Act.

Ratio Decidendi

Legal Principle Established

As an alternative to the above submissions, Mr Sheahan submitted that if this evidence is held to meet the condition set by s 97(1)(b), it should be rejected under s 135 of the Evidence Act on the basis that it will be unfairly prejudicial to Macquarie, misleading or confusing and likely to result in an undue waste of time at the trial of these proceedings. Among other things, he pointed to the hearing time that would most likely need to be devoted to the cross-examination of the 12 Storm investor witnesses to test their recollections of conversations that occurred up to 15 years ago, eg the conversation between Mr Emmanuel Cassimatis and Mr Jones that occurred in 1997.PRINCIPLES ON THE OPERATION OF SECTION 97 Both counsel relied upon a number of authorities in support of their contentions about the operation of s 97 of the Evidence Act. It is appropriate to begin with the most authoritative decision, that of the Full Court of this Court in Jacara v Perpetual Trustees WA Ltd (2000) 106 FCR 51; [2000] FCA 1886 (Jacara), which considered the operation of s 97 in some depth. While both counsel referred to this decision, Mr Sheahan placed particular reliance upon it. In Jacara, the applicant (Jacara) claimed it had been induced to enter into a lease of a kiosk in a shopping centre by a series of representations allegedly made to it by a Ms Kelly, who was an agent of Perpetual Trustees WA Ltd, the proprietor of the shopping centre concerned. The critical representations were allegedly made to a Mr Williams, who was associated with Jacara. They were to the effect that there would be a substantial increase in the number of customers attending the shopping centre, and therefore Jacara’s turnover, following its redevelopment. For present purposes, the pertinent question raised on the appeal was whether the trial judge had erred in excluding evidence of representations to similar effect allegedly made by Ms Kelly to five other persons who were also contemplating entering into leases of shops in the redeveloped shopping centre. The Full Court concluded that the trial judge did not so err and dismissed the appeal. Sackville J delivered the primary decision and Whitlam J (at [1]) and Mansfield J (at [108]) agreed. In the course of his reasons, Sackville J set out: the apposite provisions of the Evidence Act (at [17]–[24]); the legislative scheme in the Evidence Act governing tendency evidence (at [47]–[53]); the common law position on similar fact or propensity evidence (at [68]–[71]) and the test for “significant probative value” under s 97 (at [72]–[76]). It may also be noted that there was an issue in Jacara as to whether s 97 of the Evidence Act governed the evidence concerned at all (see at [54]–[67]). As is noted above (at [2]), no such issue arises in this case. It is convenient to set out a summary of the relevant principles that can be extracted from his Honour’s comprehensive and detailed examination in Jacara of the operation of s 97 and the other related provisions of the Evidence Act. They are as follows:(a)the effect of s 56 of the Evidence Act is that irrelevant evidence is inadmissible in a proceeding while relevant evidence is admissible, except as otherwise provided by the Evidence Act: see at [47];(b)under s 55(1), relevant evidence is that evidence which, if it were accepted, could rationally affect the assessment of the probability of the existence of a fact in issue in a proceeding: see at [47];(c)the definition of “relevant evidence” requires a minimal logical connection between the evidence and the fact in issue. However, the relevant evidence does not need to render a fact in issue probable, or even sufficiently probable. Instead, it is enough if it only makes the fact in issue more probable, or less probable, than it would be without the evidence, ie if it affects its probability: see at [47];(d)relevant evidence is only excluded if one of the exclusionary rules applies, or if the Court exercises a discretionary power to exclude the evidence: see at [48];(e)the tendency rule in s 97 of the Evidence Act is a contingent exclusionary rule in the sense that the tendency evidence is excluded only if the Court forms a view that the evidence would (now “will”: see at [30] below) not have significant probative value: see at [48];(f)the Evidence Act was not intended to be a mere codification of the common law rules of evidence. Instead, it was intended to make, and did make, substantial changes to the law of evidence: see at [50];(g)the tendency rule in s 97(1) of the Evidence Act departs from the more relaxed common law approach to the admission of similar fact evidence in civil proceedings set out in authorities such as Sheldon v Sun Alliance Australia Ltd (1989) 53 SASR 97: see at [68]–[71]. Thus, under s 97(1) of the Evidence Act, even if the evidence is relevant, it will not be admissible if the Court thinks that the evidence would (now “will”: see at [30] below) not have “significant probative value”: see at [72];(h)for the evidence to have “significant probative value”, more is required than mere statutory relevance (under s 55 (see above)) but something less than a “substantial” degree of relevance is required: see at [73];(i)this means that the evidence has to be “important” or “of consequence” in establishing the fact in issue, or that it has to be “clearly and strongly probative of the relevant fact in issue”: see at [73] and the cases cited; and(j)however, the statutory language provides the standard that has to be applied and statements in authorities (such as cited above) are not to supplant that statutory language: see at [74].